TOKYO, Feb 18 Japanese shares surged and the yen
sagged on Tuesday after the Bank of Japan doubled loan programs
aimed at stimulating bank lending and economic growth, while
most other Asian shares were softer after solid gains in recent
sessions.

European shares were expected to be mixed after hitting a
three-week high the previous day, with Germany's DAX >
seen rising 0.1 percent and Britain's FTSE falling 0.1
percent.

S&P stock futures pointed to a slightly firmer tone
on Wall Street as U.S. markets were set to reopen after a
three-day weekend.

Japan's Nikkei average rose as much as 3.5 percent
after the BOJ extended and expanded special loan facilities
aimed at driving more funds through the banking sector to
borrowers.

The extension had been expected as the schemes were set to
expire in March.

"Speculators jumped on the news but if you think carefully,
it's questionable if this will justify a big rally in the
Nikkei," said Norihiro Fujito, senior strategist at Mitsubishi
UFJ Morgan Stanley Securities.

The BOJ also kept its main asset purchase policy target
unchanged as expected.

The dollar jumped 0.7 percent on the yen to hit a two-week
high of 102.745 yen in sympathy with the gains in
Japanese shares.

Still, the index has gained nearly 6 percent since hitting
five-month lows earlier this month as waning concerns over
emerging market economies have underpinned riskier assets in the
past week.

But some analysts cautioned that share markets may be
getting ahead of themselves in assessing the economic outlook.

"There is a bit of a fault line between the currency market
and the stock market at the moment. U.S. shares are riding on
optimistic views on the U.S. economy but the currency market is
viewing the U.S. economic fundamentals less favourably," said
Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

A run of weak U.S. data, including an unexpected fall in
January manufacturing output on Friday and an underwhelming
report on payrolls in the last two months, has put the dollar
under pressure.

But Wall Street shares have rallied in recent sessions, with
the S&P 500 index edging near an all-time high hit last
month, in part on the view that weak figures were an aberration
stemming from bad weather.

While some investors could be speculating that the Fed may
slow its policy tightening, most expect it is likely to stick to
the current pace of reducing its bond-buying by $10 billion at
each of its policy meetings.

The market may get more clarity on Wednesday when the Fed
publishes the minutes of its last policy meeting on Jan. 28-29.

The dollar had a bleaker reaction to the soft U.S. data,
with the dollar index standing at 80.114 near its lowest
level so far this year.

As the dollar lost altitude, the euro held firm at $1.3702
, having hit a three-week high of $1.37245 on Monday.

The single currency was also helped by an improving mood
after Italian centre-left leader Matteo Renzi, who has pledged
to deliver more ambitious reforms, received a mandate to form a
new government.

That helped to push Italian debt yields to
eight-year lows.

The Australian dollar hit a five-week high of $0.9078
, testing stiff chart resistance around $0.9080.

Gold and silver held near their 3-1/2-month peaks hit on
Monday, with gold trading at $1,328.30 per once and
silver at $21.64.

Elsewhere, the Thai baht extended early losses to as
much as 0.5 percent after police officers were injured in
clashes with anti-government protesters in central Bangkok. It
has been largely resilient in the face of prolonged political
tensions, however, rising around 1.3 percent so far this
year.

Next In Market News

WASHINGTON, Dec 9 The U.S. Senate passed
legislation on Friday to fund the government through April and
sent it to President Barack Obama for signing into law, after
Democrats who sought more generous healthcare benefits for coal
miners stopped delaying action on the measure.

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